Archive for July, 2011

Fitch Ratings has taken the following rating actions on the notes issued by Belize Sovereign Investments III (BSI): USD 85.7 million notes affirmed at ‘A’; Outlook Stable.

The rating on the notes is supported by the financial strength of the insurance provider, Steadfast Insurance Company (a subsidiary of Zurich North America (ZNA)), the relatively straightforward claims paying process, as well as, to a lesser extent, by the default probability of the Government of Belize. The insurance policy covers 100% of principal and accrued interest on the notes should the Government of Belize fail to honor its obligation.

Fitch took into consideration limitations to the policy’s claims-paying probability. The ratings agency focused on the policy’s conditionality, termination events, and claims-paying process.

On June 20, 2011, the government of Belize expropriated the 70% ownership interest in the Belize Electric Company (BEL) held by the shareholder-owned, Canada-based energy giant Fortis.

Belize Electric Company Limited (BECOL), a hydroelectric business also owned by Fortis, has not been expropriated yet. It is worth noting that Fortis has invested more than USD 400 million in Belize.

Belize Electric Company has USD 27 million in debt. The company’s officials blame the insolvency on the government of Prime Minister Dean Barrow, claiming they were forced to sell electricity in Belize at rates lower than the cost in order to acquire the power from the state-owned CFE (Comision Federal de Electricidad) electric company in neighboring Mexico. As a result of the nationalization, Standard & Poor’s put Belizean sovereign bonds on its downgrade watch list.